An insight into micro-finance Uthra V. MBA., PH D., Research Scholar, Bharathiar University, Coimbatore Online published on 21 August, 2014. Abstract Poverty is one of the common obstacles in achieving higher growth and enhancing the standard of living of the people in most of the low income countries. About 1.4 billion population in developing countries is living less than US $ 1.25 a day according to World Bank report. Over the years, most of the countries have been pursuing various policies and programs to eradicate poverty. Among these measures and policies most effective policy is microfinance which, in last couple of years, has been adopted by below income countries in a bid to obliterate poverty. Microfinance is not a new topic. The objective of microfinance is to deliver a wide range of financial services like deposits, advances, insurance and other related products to people engaged in agricultural, small enterprise and poor people in order to increase their standard of living. Finance, which is basically an institutional/group finance instead of lending to individual beneficiaries unlike in the case of priority sector/rural lending, it is extended to SHGs or NGOs. Moreover, there are no subsidies or interest concessions and the basic concept in microfinance is to give a timely finance to the needy people. Therefore, transaction costs are cheaper and profitability is better under microfinance when compared to the conventional rural lending. In view of these factors in the long run, microfinance is likely to replace the conventional and concessional rural lending. There is ample scope for private & foreign banks to venture into this activity due to the above mention advantage. Rural India and its economy is mainly depend on monsoons. Famine and floods both occur at the same time in different parts of the country causing damage to the crops. Therefore, rural insurance has to be an effective tool in hedging these risk factors. Government, banks and insurance agencies have to together evolve a more proactive and vibrant measures to deal with this issue, both at micro and macro level. Small microcredit operations have existed since the mid 1700s. The actual credit goes to Dr. Mohammad Yunus who gave a new shape to microfinance in Bangladesh in 1972. He was also awarded with Nobel Prize in 2006 for this pioneer work. Like other low income countries, Government of India had been implementing various schemes and programs to alleviate poverty since independence. In the line of Bangladesh microfinance model developed by Dr. Yunus, government of India has been consistently implementing this scheme to eradicate poverty since 1999. The biggest challenge is expanding access of the poor and near-poor to sustainable microfinance is the greatest challenge faced by the microfinance industry. Top Keywords Poverty, Micro finance, Standards and principles, Economic growth. Top |